self employed single member llc

[hspiller3]

Please Help! I'm confused about this:

In my state I qualify for the state Medicaid for my child since I'm a single dad. They need to know my income every few months, but I'm not entirely sure what number I'm supposed to be giving them and they don't know which numbers I am supposed to be giving them either, which sometimes leads to a minor argument. I tell them I'm pretty sure that my income (or profit??) after all business expenses is what my income is, but they sometimes try to tell me it is the gross profit (or gross revenue??) , before all expenses, which does not make sense to me because I don't think that would be considered the income that I recieve. 

Also, I keep finding conflicting definitions for these terms if a pro can clarify them? Thanks!!!

Gross and Net Revenue??

vs.

Gross and Net Profit??

vs.

Gross and Net Income??

[Vanessa A]

I cannot tell you what the state Medicaid system uses as your income, however, as you have pointed out, Gross and Net are very different.

For tax purposes, your gross income is your total income from your business before any deductions at all are considered.  Your Net Profit/Revenue/Income are all calculated the same....by deducting your expenses from your gross income.  You are taxed on your Net Income, not your Gross income.  If you have Gross earnings of $100,000, but have expenses of $105,000, you are not taxed on this income as the IRS considers you to have no taxable self-employment income, instead you have a loss.  Social Security and Medicare also use your net earnings to determine your taxable amount.  

Basically, your income as far as the federal government is concerned is your net income. 

[AmeliesUncle]

Which state?

[hspiller3]

West Virginia. They said I cannot have more than approx. $2200 a month income for my son to qualify for the state health insurance programs like Chips etc. When I gave them all of my numbers they told me that my "personal income that I receive is the gross total before any business expenses"..  I've looked at dozens of things online that say otherwise though.  And, they have said they don't know anything about LLC's, sole proprietorships or pass through entities. It really seems to me that these state departments seem to do and follow whatever brain fart they have, regardless of the actual law, and don't seem to care about finding out the truth about what they are talking about. According to what I have seen online multiple places, my income would be after my business expenses, because those expenses are required in order to have my business to provide an income. Plus, we get taxed on our income which is figured as what's leftover after business expenses. It is so challenging dealing with this state government sometimes! It's like they really don't know what they're doing or talking about and they are all just playing pretend.

Side note: They also argued and demanded when I started my business that I HAVE TO collect and pay sales tax, even though my business is exempt from doing so, per state law, which I had to go and search through all of the state's legislature to prove them wrong. They ended up saying "Oh whoops ok then nevermind".

They also told my ex that she had to have 7 years total of college to transfer her Funeral Directors license here, which the law plainly states that it's EITHER a 3 year mortuary science degree OR a 4 year degree with an approved internship. The head of that licensing department has since been fired for illegaly denying potentially hundreds of people from getting their FD license here...

[hspiller3]

Thank you, that makes sense to me.

 I have tried explaining that to a few people in this state and I don't know if they are just ignorant or really don't care like most in state employees here. They have also told me that they don't know anything about businesses or llc's or sole proprietorships et cetera, which tells me to that they are just making it up as they go which is not fair to any of us.

I have posed the scenario to them where "if my business made $80,000 in annual gross revenue, and my business expenses were $75,000, that means I have only made $5000 income. So how could anybody with only $5000 income for the year be considered as making too much to qualify for any childrens programs? Just because you are not looking at the correct numbers? There's no logic in that whatsoever, so that can't be correct". That's when they've said they don't really know anything about that business stuff but that's just the numbers that they go by. And they don't explain if it's what they personally go by or if it's what the actual law states. It is so difficult dealing with such an ignorant and untrained state government. 

[AmeliesUncle]

West Virginia fully "expanded" Medicaid.  That means they only look at your Adjusted Gross Income (line 11 of your Form 1040), which is your income AFTER all business deduction and some other deductions (including the 1/2 SE tax deduction on Schedule 1 of your tax return).

I am unsure if CHIP follows the same rule, but I've always seen CHIP to be the same or more lenient of income than Medicaid.

Other programs may have different rules, but I am almost certain that none of them would use your "gross" business income, rather than your "net" business income.

As you said, it seems like you are just talking with people who are unfamiliar with the rules.  You may be able to ask for a supervisor (or even the supervisor's supervisor) to find someone that is more knowledgable.  If you get denied, there should be an appeal process that should get to someone that actually knows what they are talking about.

[AmeliesUncle]

I just found it.  CHIP does have the same methodology as Medicaid.

For CHIP, Title 42, Regulation §457.315 says to the same methods as §435.603 (which is for Medicaid).  As I said above, that is only based on your Adjusted Gross Income (line 11 of your Form 1040).

https://www.law.cornell.edu/cfr/text/42/457.315

https://www.law.cornell.edu/cfr/text/42/435.603